Literary festivals are rocking again. The annual migration of the British reading public to church halls, marquees and hotel ballrooms (full disclosure: I've spoken on several occasions in all of these) has become one of the signs of summer, from Folkestone to Edinburgh.

This postwar cultural phenomenon actually began in Cheltenham in 1949. It really boomed after the launch of Hay in 1988. Right now, it's a bonanza that defies commercial gravity. The new festivals launched in 2011 include Chalke Valley, Surrey Heath and Guernsey. Meanwhile, Fenland's Wordfest is sensibly rebranding itself as the Cambridge literary festival.

At present, all told (estimates vary), there are some 250 arts and books festivals in the UK promoting the buzz of live authorship. At the top end, there's a lot of money flying about. Hay, now going global, turns over about £9m-£10m; Edinburgh approaches £2m; Cheltenham £1.49m and Bath £1.3m.

Here's where the sunny picture of Britain's festival paradise begins to darken. Times are hard. Not only is it increasingly difficult, I hear, for festival directors to scare up new funding from festival sponsors, almost all potential media partners (national newspapers such as the Observer and the Telegraph, and commercial broadcasters like Sky), with established alliances, are reluctant to extend their patronage.

The upshot is a trend away from celebrity events of the kind pioneered at Hay and a move towards local programming, local audiences and local media. The Stoke Newington literary festival is a good example. Inspired by a tradition that can be stretched to include Daniel Defoe and Edgar Allan Poe, it has built up a vigorous relationship with the local press (N16 Magazine and the Hackney Gazette). It flourishes precisely because it knows where its bread is buttered. Other excellent festivals that have benefited from thriving local connections include Bath, Buxton, Marlborough and Brighton.

There remains, however, a spectre at the feast, and its name is Blockhead, as in "no man but a blockhead ever wrote, except for money" (Samuel Johnson). A combination of the recession in book advances and the decline of traditional book sales has made the writers who attend these festivals for nothing suddenly conscious of their role as "the talent". Not only do they want to get paid for their efforts, the literary agents who represent them have begun to explore the commercial possibilities of running speaker agencies as part of their overall service. The latest to do this is Conville & Walsh, which has just launched Hire Intelligence. The days when festivals can rely on writers speaking in public for a few bottles of plonk must be numbered.

There's an analogy to be drawn here with the music industry. When rock bands started to suffer from downloads and the artificially high price of CDs, musicians responded by getting out on the road. Bands compensated for their losses on the recording side by making money from live performances.

At the moment, writers are not in a position to do this, but I detect a low grumble of discontent in the literary undergrowth. If as a writer you speak to, say, 500 people in a tent who have paid, perhaps, £7.50, and get none of the £3,750 gross, you feel cheated. (The sale of perhaps a dozen copies of your latest book is hardly an adequate compensation.) The figures can go a lot higher. I spoke to a well-known diarist recently who was scratching his head at the realisation that a sell-out audience of 1,500 had paid £12 apiece to hear him speak, with every last penny of the £18,000 gate going to the festival organisers.

Writers don't have to be whizzes at basic arithmetic to realise, as one of them said to me last week, that "bugger all is not a percentage I can live with as a professional writer". There has been some wild talk about writers setting up their own festival, but I don't see this happening. Putting the lunatics in charge of the asylum is not the solution. A rethink of custom and practice at Britain's literary festivals makes a lot more sense. I predict this is about to become yet another unintended consequence of the credit crunch.

Rude? Well, that's rich coming from the Jackal

Rupert Murdoch will have been watching the US closely for threats to News Corp. One hostile witness to the behaviour of his publisher HarperCollins who will hardly be troubling the mogul's equanimity is the much-feared literary agent Andrew Wylie, aka the Jackal. He claims that the company was involved in "improper behaviour" and should face a deeper investigation into "what is proper behaviour and what isn't". Pressed to explain himself, the Jackal declared that he didn't want "to go into those examples". His main complaint seems to be that HarperCollins executives had been "unusually shrill and punitive towards authors". In other words, pretty much the way Mr Wylie has behaved towards publishers for the past several years.

How you can help to make a book happen

A new publishing venture, Unbound, launched at the Hay festival in May and describing itself as a "pioneering crowd-funding portal for book publishing", seems to be taking off. Last week, Unbound announced the first of its projects to reach a target level of pledges. Evil Machines by former Python Terry Jones will be a book of 13 fables, parodies of our relationship with technology. The book was pitched directly to readers through unbound.co.uk and Jones says he expects to finish the book in time for publication in November 2011. It certainly sounds very digital and innovative. But it's not all goodbye Gutenberg. Conservative‑minded readers who like books are being encouraged to pre-order copies of a limited edition of Evil Machines in hardback from Faber and Faber.